Outsmarting The Pension Scams

From workplace pensions to private pension plans, millions of employees pay into pension schemes every year in order to enjoy a happy and financially secure retirement.

Unfortunately, in the last few years there has been a dramatic increase in the number of employees being conned out of their life savings via pension scams.

In fact, City of London police report that £9.1 million worth of fraudulent pension schemes have been reported between April and August 2015 alone.

Advertised as ‘free pension reviews’ or ‘lucrative investment opportunities’, these pension scams have been devised by unscrupulous businesses to trick consumers into handing over their life savings.

These pension scams tempt consumers with the allure of extra tax savings and high returns from new investment opportunities within the United Kingdom or overseas when in fact they result in employees losing a substantial portion of their hard-earned pension pots.

As matters stand, the government’s 2014 pension reforms now enable anyone over 55 years old to receive their entire pension fund as a lump cash sum with no interest paid on the first 25% of the funds.

However, as Auto Enrolment advise, many fraudulent firms have been able to scam consumers by stating that they have found legal loopholes which will enable them to receive more than the usual 25% tax-free cash lump sum if they transfer their pension funds to the fraudulent firm.

In reality, consumers are being tricked into transferring their retirement funds into investments which offer little returns or sometimes none at all.

How to spot a pension scam

Although these fraudulent pension schemes have tricked thousands of innocent consumers out of their pension funds, there are several signs which are clear indicators that a pension scheme could be a scam.

Firstly, one of the best ways to spot a pension scam is to scrutinise the way that the pension company has contacted you. If you have been cold-called over the phone, by email, via text message, or in person on your doorstep then this is a warning sign that the firm may be operating a fraudulent scheme.

Secondly, another clear indicator that a firm is operating a pension scam is if they claim to be acting under the authority of the Pension Advisory Service or another government body.

These reputable organisations will never contact you directly regarding pension schemes so it is extremely likely that the ‘official representative’ contacting you is not who they claim to be.

In addition to acting under false pretences, businesses running pension scams will also often use false contact information. Therefore, if you are contacted by a pension company who give you a mobile phone number or PO Box address as their contact information then this is a clear warning sign that their intentions may not be legal.

As a rule, if a pension company use terminology such as ‘no obligation consultation’, ‘overseas investment opportunity’, or if you feel pressured into making a hasty decision at any stage, then it is highly likely that you have been contacted by a pension scam and you should refrain from divulging any personal information to them.

How to report a pension scam

As mentioned above, you should never sign any pension paperwork or divulge any of your private financial information if you have been contacted out of the blue by a pension company.

Even if they attempt to entice you with a polished sales speech, you should conclude your contact with them and carry out further research into their organisation. You can do so by checking their company credentials with the Pensions Advisory Service.

After doing so, you should also corroborate their company’s contact information with the Financial Conduct Authority; an online resource dedicated to providing consumers with information on registered businesses and firms.

If you suspect that a pension company is fraudulent, you can check whether they are listed on the FCA’s Scamsmart Warning List. If these checks confirm your suspicions that the scheme is fraudulent, then you can report them to the FCA as well as Action Fraud; the United Kingdom’s national fraud and cyber crime reporting centre.

By following these precautions and reporting pension scams, you can protect yourself and others from losing your life savings to fraudulent firms!